I just had a baby and would like to know the best way to start saving for her future. Would a CD be good and if yes, would I have to pay taxes on the interest? Please help

There are education accounts in most US states that allow for tax free savings up to some limits for the child's education. Since this is a much longer term savings, many of the money market accounts funds such as Merril Lynch are often good choices. Most normal bank accounts and CD's don't keep up with inflation esp since you are paying taxes on the interest.

A lot will depend on how much you want to invest, where you live, and what type of personal investments you have also.

CDs are not the best because the rates are bad. They are basically a savings account with a certificate attached... I would suggest looking into Roth IRA, Education Savings plans, & Mutual funds. Look for mutual funds with a good 10 year long track record. Leave the money there and it will make more money for you.